Lessons from the Pros


The Noise is Loud Lately

If you have been watching the financial news on television, radio, or the internet lately, you have been bombarded with various opinions on where the markets may be headed. This is normal, but as we are making new highs on the indexes, it seems that the noise of the news is becoming deafening! At times like this, it is even more important that we ignore that fluff and focus on what is important: price action on the charts.

So in looking at the S&P 500 on a weekly chart, you can easily see that we are still in a strong uptrend with no signs of stopping yet.  We have been making higher major bottoms.  That is typical of a bullish trend.  Although there was a major top put in a few weeks ago, without a lower major top followed by a break of the major bottom, we are not reversing the trend.

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In a previous article, “Watching the Markets,” I discussed the importance of using a comparison between the major indexes to see which one is the leader in the trend and when the trend may be ending.  Looking at the current view of the bullish trend that started on November 15th 2012, the Russell 2000 index has been the bullish leader.

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Looking at the weekly chart of the Russell 2000, the latest impulse in the bullish trend was very weak and stopped at a 61.8% projection.

may rut weekly projection

We are seeing choppy movement but are still bullish unless we break the latest major bottom and also demand zones.

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So as an investor in the equity markets, there is no need to panic yet.  Make sure your positions have stops in place in logical places and ignore the noise.  As a trader, look for the shorter time frame opportunities on your charts and trade the price action you see, not the noise you hear.

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.